United Kingdom Internal Market Bill

Paul Scully Excerpts

Consideration of Lords amendments & Ping Pong & Ping Pong: House of Commons
Monday 7th December 2020 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

I beg to move, That this House disagrees with Lords amendment 1.

[Madam Deputy Speaker]

With this it will be convenient to discuss the following:

Lords amendments 2 to 7.

Lords amendments 8 to 19, and Government motions to disagree.

Lords amendment 20 to 29.

Lords amendments 30 to 34, and Government motions to disagree.

Lords amendments 35 to 41.

Lords amendment 42, and Government motion to disagree.

Lords amendment 43, Government motion to disagree, and Government amendments (a) and (b) to the words so restored to the Bill.

Lords amendments 44 to 57, and Government motions to disagree.

Lords amendments 58 to 60.

Lords amendment 61, and Government motion to disagree.

[Paul Scully]

This Bill has generated a lot of debate in both Houses, and rightly so. It is a Bill that is vital in providing certainty for businesses and for protecting the Union. It is a Bill that allows the continuing smooth functioning of our UK internal market at the end of the transition period. Our approach will give businesses regulatory clarity and certainty and ensure that the cost of doing business in the UK stays as low as possible, and it will do so without damaging and costly regulatory barriers emerging between the nations of the United Kingdom.

In the other place, the Government and peers had good discussions and debates on the principle behind the Bill, and they have come to very reasonable proposals in some areas. It is right that both Houses work constructively to scrutinise and improve legislation, and the Government are therefore accepting a number of Lords amendments. That is why the Government are disappointed that in some cases amendments put forward by the other place would do the opposite and generate more ambiguity and uncertainty. Other amendments put forward go further, in hampering the Government’s ability to protect the Union and our internal market, to level up the country and to take advantage of the opportunities afforded by the end of the transition period. That is why today the Government are disagreeing with a series of amendments, to which I will now turn.

Regarding Lords amendments 1, 19 and 34, the other place and Her Majesty’s Opposition in this House have been clear about their strong support for common frameworks. I am pleased to hear that, because the UK Government are strongly committed to them as well. Joint work with the devolved Administrations to develop common frameworks is progressing well, and the first three frameworks are currently undergoing parliamentary scrutiny. The common frameworks programme represents successful joint working, ensuring that our shared objectives of making coherent policy, upholding high standards and supporting the distinct needs of each part of the UK can advance as one. They are evidence of our mutual respect for devolution.

I am pleased that work is well under way on the 33 frameworks that we expect to conclude jointly with the devolved Administrations. Thirty of those will be provisionally agreed by the end of 2020 and will then be scrutinised by Parliament and the devolved legislatures. A small number are likely to clear scrutiny by the end of the transition period, at which point they will become full frameworks.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

It is good that the Minister recognises the importance of common frameworks. All four nations of the United Kingdom have agreed a common framework on an emissions trading system, so why is the Treasury now considering imposing a carbon emissions tax instead, against the wishes of the devolved Administrations? Surely that does not respect common frameworks.

[Paul Scully]

Discussions on that are ongoing and it is right that we have them. On the common frameworks, the devolved Administrations and representatives of England in the UK Parliament have made their views well known.

[Jim Shannon (Strangford) (DUP)]

We have a strong agrifood sector in Northern Ireland. There needs to be an understanding between the Northern Ireland Assembly and this place, to ensure that our agrifood sector can continue to expand and sell its products around the world. Will the Minister reassure us that that will happen and that nothing will hinder it?

[Paul Scully]

The whole purpose of this is that we can get the internal market right. We do not want to hamper any business, wherever it is in the UK, from being able to trade overseas with the opportunities afforded by global Britain at the end of the transition phase and beyond.

I want to make progress because I want to get across some detail and allow other Members to have their say. The common framework programme was never designed to be an all-encompassing solution to the maintenance of the internal market. This Bill will instead provide the additional legislative protection to internal UK trade, which is required for business certainty. As an aside, I note that half of the active frameworks have little or no interactions with this Bill, as they do not pertain to the internal market. That has sometimes been forgotten in recent debates.

The flexibility that underpins the framework programme is key to its success. It was set up in 2017 with an objective to manage regulatory coherence in specific devolved policy areas of returning EU law. While the frameworks are envisaged in very high-level terms in schedule 3 to the European Union (Withdrawal) Act 2018, they are taken forward by voluntary agreement, which is the reason why neither the UK Government nor the devolved Administrations have so far felt the need to codify the common frameworks process in legislation. I thank the noble and learned Lord Hope for his considered contributions to the debate and for his thoughtful amendments to the Bill. However, while the Government have carefully considered the arguments made in both Houses about putting common frameworks on the face of the Bill, we feel that that may not sit well with the flexible and voluntary nature of the common frameworks programme.

In addition to their voluntary nature, we must also bear in mind that the current frameworks are jointly owned by the devolved Administrations. Any proposal to legislate them into this Bill would need to take into account their involvement in the programme overall. I am therefore concerned that the Lords amendments would automatically disapply mutual recognition and non-discrimination principles. This would create a very broad exclusions regime and uncertainty for businesses and consumers over the terms of trade within which they are operating. That is clearly not in keeping with the aim of this Bill, which is to provide maximum certainty and a stable trading environment.

[Joanna Cherry (Edinburgh South West) (SNP)]

I will just take the Minister back to his statement that the common frameworks were never supposed to be all-encompassing in relation to the internal market, because I am looking at the Joint Ministerial Committee communiqué from 16 October 2017, which says in its first principle that the common frameworks were to be

“established where they are necessary in order to…enable the functioning of the UK internal market”

The Government have gone back on that, have they not?

[Paul Scully]

The hon. and learned Lady will note that the document states “where…necessary”. As I said earlier, many of the common frameworks do not relate to the internal market. That was my point exactly.

It is a core point that none of us should wish to see internal barriers to trade erected inside our country to the detriment of jobs and growth. We have been clear in the other place about how we see the common frameworks programme and the market access principles interreacting with this point at the heart of the argument. While common frameworks are jointly owned, the UK’s full internal market regime can only be owned by the UK Government and overseen by the UK Parliament.

The Minister for the Constitution and Devolution, my hon. Friend the Member for Norwich North (Chloe Smith) looks forward to completing the delivery of the common frameworks programme, discussing further with our partners in the devolved Administrations and the devolved legislatures how we can capitalise on working ahead through common frameworks and put these areas of co-operation on a sustainable footing for the longer term to the benefit of citizens and businesses. We welcome the support of right hon. and hon. Members in achieving that, but we have been clear that amendments 1, 19 and 34 are not necessary and have considerable drawbacks. I therefore call on the House to disagree with them.

To speak to Lords amendments 8 to 13, 15, 16 to 18, 30 to 33 and 56, the Government have taken positive steps to reach a compromise position that balances concern about delegated powers with the ability of the Government to act to protect our internal market. The Government have already made significant steps. We have removed the power, which is no longer considered essential, for the operation of flexibility in the internal market system. We have made further changes on transparency and accountability, such as a review mechanism on the use of such powers. In the other place, we tabled amendments to require consultation with the devolved Administrations before the use of key powers, reflecting our previous commitments. However, once consultation is undertaken, the right place for final decisions should be back in Parliament where parliamentarians from all parts of the UK can debate and vote on the proposed use of the powers. The Government are therefore disappointed by the decision in the other place.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

My understanding is that the Welsh Senedd will vote tomorrow to decline to approve the legislative consent motion for the Bill. Does that not indicate the problem with the British Government’s approach to consent? Consent means nothing without the power of veto.

[Paul Scully]

If the Welsh Assembly decides that way, that will be regrettable—[Interruption.] The Welsh Senedd. It will be regrettable, because it is important that we continue to work together and allow continuity of trade and business between Wales, Welsh businesses and, indeed, the other nations of the UK. That is what Welsh businesses have been asking us for as we have been talking to them. They want certainty, and this Bill will give them certainty.

The Government are disappointed that the other place did not take up our reasonable offer and removed key provisions needed to ensure the operation of the internal market.

[Sammy Wilson (East Antrim) (DUP)]

Does the Minister not accept that for places such as Northern Ireland, Wales and Scotland, common standards that allow free trade between those parts of the United Kingdom and their main market, which is probably in England, are an advantage to everyone? The provisions in the Bill should not scare or frighten anybody.

[Paul Scully]

The right hon. Gentleman puts it correctly. When I have spoken to businesses in Scotland, Wales and Northern Ireland, they have agreed with businesses in England. The main market for so many of these businesses is within the United Kingdom. We talk about global Britain, but we have to make sure that we have our internal market right. The opportunities for business, including those in Northern Ireland, are absolutely at the heart of this Bill, and I appreciate his intervention.

Removing the powers that I have outlined would make it difficult for the Government to respond to businesses and the wider stakeholder feedback and act rapidly to respond to changes in the UK internal market due to the shifting economic landscape. The other place also added in conflicting, inconsistent amendments accepting our consultation offer, but also adding consent mechanisms.

Moreover, the other place’s three amendments 12, 13 and 56 introduce a new system for excluding requirements from market access principles, based on a long list of legitimate aims. This new clause would render the protections in part 1 almost meaningless. The regulator or legislator could justify a very wide variety of discriminatory measures using the justifications in the new clause. It would result in uncertainty as to what is in scope and leave little protection from regulatory barriers for businesses operating across the whole of the UK. However, the door remains open to the other place to reconsider, and we have kept our offer on the table.

I will turn now to Lords amendments 48 and 49. Clauses 48 and 49 support the Government’s determination to deliver the commitments on which we were elected—levelling up and delivering prosperity for the whole United Kingdom and strengthening the ties that bind our Union together. They provide for a unified power that operates consistently UK-wide.

[Alan Brown]

Will the Minister give way?

[Paul Scully]

I will just make progress for a minute.

The power will allow for strategic investment throughout the UK, underpinning the United Kingdom Government’s determination to see all parts of the UK flourish. It will make sure that we can deliver UK-wide replacements for EU funds, including meeting our manifesto commitment to replace EU structural funds, and allowing the UK Government to invest directly to support communities and businesses across all four parts of the UK.

[Liz Saville Roberts (Dwyfor Meirionnydd) (PC)]

Can the Minister explain how this can be strategic investment if the Senedd and the Scottish Parliament have no say in arranging it?

[Paul Scully]

As we said in the last debate in this place, this is complementary to existing spending powers in Wales and Scotland. We will always look to work for the good of the people there, which will reflect—undoubtedly, I am sure, on so many occasions, if not all occasions—the mood and direction from their elected politicians in the Senedd.

We need to make sure that we can deliver the UK-wide replacements for EU funds, including meeting our manifesto commitment to replace EU structural funds and deliver the UK shared prosperity fund, which will allow the UK Government to invest directly to support communities and businesses across all four parts of the UK. Previously in many of these areas, the EU mandated how our money had to be spent, with little say from elected representatives in the United Kingdom. The UK Government intend to take a much more collaborative approach in delivering any funding that replaces EU programmes.

The UK Government remain committed to working collaboratively with key partners, including devolved Administrations, in the provision of financial assistance under this power. Let me be clear that this power is in addition to the devolved Administrations’ existing powers. It will allow the United Kingdom Government to complement and strengthen the support given to citizens, businesses and communities in Scotland, Northern Ireland and Wales. It does not take away responsibilities from the devolved Administrations.

[Chris Elmore (Ogmore) (Lab)]

The frustration at this utter confusion is that this actually circumvents the devolution settlement. Devolution has been in place for some 20 years, and it is Ministers in Wales who have been working with the European Union on how European funding is allocated within projects in Wales. This new system removes the decision making from Welsh Ministers and circumvents the devolution that has existed for more than 20 years. Can the Minister not understand the frustration on the Opposition Benches and the bewilderment of Welsh, Scottish and Northern Ireland Ministers about why they are just not being consulted on priority projects in Wales and any of the other nations of the UK?

[Paul Scully]

I can understand the frustration if that is the wilful misinterpretation of what is actually happening. The EU mandates so much of this spending before it gets to the Welsh Senedd, the Scottish Parliament and the Northern Ireland Assembly and, indeed, here in England, from where we are speaking, but we will work collaboratively to ensure that so many of those concerns are met.

We are disappointed as a Government that the other place has decided to take out the power and hamper the Government’s ability to level up the country and drive investments into all parts of the UK. These Lords amendments also alter the financial arrangements made in this House, and I therefore call on this House to disagree with them.

Turning to Lords amendment 51, I emphasise the importance of the UK continuing to take a clear and consistent approach to subsidy control as we move away from EU state aid rules. The Government have always been clear in our view that the regulation of state aid and the EU’s approach to subsidy control is a reserved matter. This reservation does not change the devolved Administrations’ position in practice. The devolved Administrations have never previously been able to set their own subsidy control rules, as this was covered by the EU state aid framework, but they will continue to make their own spending decisions on subsidies, as they do currently. The effect of the amendment would be to create unacceptable uncertainty regarding the extent to which subsidy control is a reserved or devolved competence. This would potentially give rise to inconsistency if there were different regimes to regulate subsidies across the UK. Ultimately, that could undermine fair and open competition across our internal market, inevitably discouraging investment in the UK, bringing additional costs to supply chains and consumers.

This reservation will enable the UK to design a bespoke subsidy control regime that meets the needs of the UK economy. The Government have been clear that any future domestic regime will operate in a way that works best for all UK businesses, workers and consumers. In the coming months, we intend to publish a consultation on whether we should go further than our World Trade Organisation and international commitments, including whether further legislation is necessary. The House should therefore disagree with this amendment.

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[Sir Robert Neill (Bromley and Chislehurst) (Con)]

The Minister will appreciate, having had some hand in the amendments, that I have an interest in this matter. He will have seen that a statement has been put out by the Government—following the meeting of the Joint Committee earlier today—in which they undertake that they would, in effect, remove clause 44 and deactivate clauses 45 and 47, which were the subject of some concern in this place. Will he confirm that that is the case? Will he also confirm that were there to be any like clauses included in the taxation (post-transition period) Bill, which may come before us, they should, at the very least, be subject to the same parliamentary lock as was inserted in this Bill, if they were to be required at all?

[Paul Scully]

I thank my hon. Friend for his contributions not just here and now, but in the earlier stages of this Bill, which allowed for that important lock. The taxation Bill and this Bill work in lockstep as well, and I can confirm his interpretation. I will come on to that in a second regarding the statement earlier today.

After the transition period ends, Northern Ireland will and must remain fully integrated with the UK’s internal market. There should be nothing controversial about that. The protocol expressly recognises that Northern Ireland will remain part of the UK’s customs territory and qualifying Northern Ireland goods will enjoy unfettered access to the rest of the UK market. We will never accept additional burdens or barriers on goods moving from Birmingham to London, and neither should we accept those on goods moving from Belfast to Liverpool. Moreover, clause 46 would codify in legislation the existing practice where state aid is notified to the European Commission by the Foreign Secretary via the UK mission in Brussels.

[Ian Paisley (North Antrim) (DUP)]

I thank the Minister for the commitment he has made about goods travelling from GB to Northern Ireland. Can he tell us whether the same assurance will be in place for all goods moving from Northern Ireland to GB?

[Paul Scully]

I can indeed.

Part 5 of the Bill contains vital provisions to ensure that this will always be the case, whatever the outcome of our negotiations within the EU. Since these clauses were originally introduced, the UK and EU have worked constructively together through the withdrawal agreement Joint Committee discussions, which continue to progress, and final decisions are expected in the coming days. I can confirm today that if the solutions being considered in those discussions are agreed, the UK Government will be prepared to remove clause 44, concerning export declarations, from the Bill. The UK Government would also be prepared to deactivate clauses 45 and 47, concerning state aid, such that they could be used only when consistent with the United Kingdom’s rights and obligations under international law.

[Stephen Farry (North Down) (Alliance)]

I wonder whether the Minister could reflect on two points. First, I am relatively new to this place, but my understanding is that there has not been a bigger vote in the other place against a proposal from this House for many decades, if not centuries. Secondly, does he recognise that the majority of people and businesses in Northern Ireland want to see the solutions he set out work through the Joint Committee and not through any breach of international law? It is important that there should be a solid legal framework to enable businesses in Northern Ireland to conduct their affairs.

[Paul Scully]

Indeed, we all want this to be dealt with through the Joint Committee. That is why the discussions are continuing, and that is why, in these crucial hours of negotiations between the UK and the EU, we wish them well in that regard.

[Sir Robert Neill]

I will not trespass on the Minister’s time again, but will he confirm that the deactivation of clause 47 would remove one of the areas—the “notwithstanding” clauses—that caused most concern, particularly to legal commentators? Does he agree that that is a significant gesture of good faith on the part of Her Majesty’s Government’s and that it will hopefully remove some of the real concerns that have, for legitimate reasons, been expressed in other places? Does he agree that this demonstrates that we want to find a constructive way forward?

[Paul Scully]

My hon. Friend is right again. I know the debate that has surrounded the “notwithstanding” clauses, and it is important that we work in collaboration and partnership as we do these difficult negotiations, but, ultimately, that is where we want to solve these problems, rather than having to legislate for them in the first place. As I say, we will deactivate them when we get to the point that that is consistent with the United Kingdom’s rights and obligations under international law. While we are hopeful of success, it is only prudent that until such time as the discussions have successfully concluded, we retain these clauses in their current form as a fall-back option.

As has been said many times, the Government are fully committed to implementing the withdrawal agreement and the Northern Ireland protocol, and we have already taken many practical steps to do this, but these clauses will ensure that, irrespective of the outcome of our negotiations with the EU on implementation of the protocol, we will always protect Northern Ireland’s place in the United Kingdom. They will ensure that businesses based in Northern Ireland have unfettered access to the rest of the United Kingdom and that there is no legal confusion or ambiguity in UK law about the interpretation of the state aid elements of the Northern Ireland protocol.

[Sammy Wilson]

I thank the Minister for giving way again. I just want to get some clarification. Article 16 of the Northern Ireland protocol makes it quite clear that where the protocol does serious economic, societal or environmental damage to Northern Ireland, the Government have the right to act unilaterally. If this clause is to be removed and set aside, how will the Government be able to take unilateral action if changes in the protocol or demands from the EU do the kind of damage that is outlined in article 16?

[Paul Scully]

As I have said before in regard to these clauses, the changes that we set out in a statement earlier today work on the assumption that we have had success in the discussions and that we can solve this elsewhere. We hope that the “notwithstanding” clauses will never have to be used, and we understand the concerns that have been raised. Making regulations of this nature would not be done lightly. That is why, before this clause is commenced, this House, as we have discussed, will be asked specifically to approve a motion to that effect, and the other place will hold a take note debate. Any regulations made under this clause would be subject to the affirmative or made affirmative procedure, meaning that they will be subject to debates requiring a vote in both Houses.

Moreover, as the Prime Minister has made clear, in addition to taking these steps in domestic law, if we had to make it clear that we believed the EU was engaged in a material breach of its duties of good faith as required and provided for under the withdrawal agreement and the Vienna convention on the law of treaties, we would seek an arbitration panel and consider safeguards under article 16 of the protocol in parallel. We must ensure that, in any scenario, we are upholding the economic integrity of the United Kingdom, maintaining the Belfast or Good Friday agreement and the gains of the peace process and protecting the delicate balance between communities in Northern Ireland.

These “notwithstanding” clauses are a limited and reasonable step that create a safety net to enable those aims to be met. They ensure that the UK Government can always act as necessary to protect and maintain our UK internal market and Northern Ireland’s integral place in it. That is entirely in keeping with what the Government have constantly said, including in public commitments from the Prime Minister, our manifesto commitments and our commitments to the people of Northern Ireland. That is why the Government cannot agree with the Lords amendments, which would remove what was part 5, and why I urge hon. Members to disagree with the Lords amendments and restore the critical provisions in full.

[Ian Paisley]

I thank the Minister for allowing me to intervene in this way. Does he welcome the comments made by the Irish Foreign Minister, Mr Coveney, who said that, essentially, all the commentary for the past three years on erecting borders on the island of Ireland was basically a game of bluff by the Irish Republic? Does he welcome the fact that it has now conceded that point?

[Paul Scully]

I have not heard those words, so I will not comment on them. There has been a lot of commentary, but what is important is the reality. Northern Irish businesses want the certainty offered by this Bill and the unfettered access to the GB market.

I emphasise that the Government has been reasonable, and will continue to be reasonable, in discussions on this Bill. We have made many positive changes to the Bill and they are on the table, but the Government need to balance this with the need to deliver a Bill that provides the certainty that businesses want and need to invest and create jobs, to maintain high standards and choice for consumers while keeping prices down, to ensure that the Government can continue to continue to level up the whole of the United Kingdom and strengthen our precious Union, and, ultimately, to preserve the UK internal market that has been an engine of growth and prosperity for centuries.

[Madam Deputy Speaker (Dame Rosie Winterton)]

Colleagues will see that there are a large number of right hon. and hon. Members who want to contribute to this debate. If we have any chance of getting them in, I will have to start with an immediate five-minute limit on Back-Bench speeches, but that may well have to go down.

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[Mr Deputy Speaker (Mr Nigel Evans)]

Order. My apologies to the seven Members who did not get in to speak. I call the Minister.

[Paul Scully]

I thank everybody who spoke in the debate today and all the right hon. and hon. Members who have engaged with the Bill throughout.

From many speakers, especially at the beginning of the debate, we heard about exactly what businesses and people throughout the country have wanted—the certainty and consistency that the Bill will deliver. Unfortunately, we have heard, as we have throughout the Bill’s passage, a lot of inconsistency from Opposition Members. We have heard the SNP talk about the fact that we are not going to get a trade deal with America but, by the way, when we do, we have to accept chlorinated chicken. Neither of those things are true.

We have heard that people want the Government to change and negotiate and work with the European negotiating team, but when we reach out to them to explain what part 5 of the Bill is all about and the fact that we will not need a safety net should we get successful talks in the Joint Committee, it is described as shambolic. Which would people like? Would they like change? I think we want certainty.

People have talked about the need for devolution in Northern Ireland and the need to respect Northern Irish businesses and the parties in Northern Ireland and give their businesses certainty, but Opposition Members will vote against part 5 and, in doing so, vote against unfettered access for Northern Ireland into GB.

We heard an SNP Member describe the UK Government as a boa constrictor, yet they want independence from the UK Government and from the other nations to go back to the boa constrictor that is the EU.

We need the Bill and these clauses now because parliamentary time dictates as much and we want the legislation to be ready for the end of the transition phase, whatever happens in the remaining days of discussions with the EU. I wish both sides well in their discussions.

To conclude, the UK’s internal market has been the bedrock of our shared prosperity for centuries. It has enabled businesses and individuals to thrive and has been the source of unhindered and open trade throughout the country. It has helped to demonstrate that our country is greater as a Union than the sum of its parts.

The Government are committed to safeguarding the Union. We fully support devolution and continue to put the Union at the heart of everything we do. I very much believe that the four corners of the UK are stronger together and that the Bill supports and respects the devolution settlements. Some Members have said that the Bill is a threat to devolution, but in reality they are trying to further their narrow political arguments rather than look at the wider political arguments. Their narrow political arguments about independence have nothing to do with devolution.

I stress that the proposals in the Bill are designed to ensure that devolution can continue to work for everyone. All devolved policy areas will stay devolved and the proposals ensure only that there are no new barriers to UK internal trade. Indeed, at the end of the transition period hundreds of powers that are currently exercised by the EU will flow back to the UK. Many of these powers will fall within the competence of the devolved Administrations, and this flow therefore represents a substantial transfer of powers to the devolved Administrations that they did not exercise before the EU exit.

The Bill is vital in preserving our internal market and continuing to provide certainty for businesses as we seek to recover from covid-19, prepare for the opportunities after the transition period and protect jobs. It will ensure that UK businesses can trade across our four home nations in a way that helps them to invest and create jobs, just as they have for hundreds of years. I want to emphasise again that the Government have been, and will continue to be, reasonable in discussions on this Bill. We made many positive changes, and they are on the table, but ultimately the Government need to balance this with the need to deliver a Bill that provides the certainty that businesses want and the need to invest and create jobs. I therefore call on hon. Members to support the Government in these objectives, which I believe we all share, when they vote today.

Question put, That this House disagrees with Lords amendment 1.